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Problem 12-25 (Algo) CVP analysis-what-if questions; breakeven LO 12-7, 12-8, 12-9, 12-10 [The following information applies to the questions displayed below.] Marathon Company makes
Problem 12-25 (Algo) CVP analysis-what-if questions; breakeven LO 12-7, 12-8, 12-9, 12-10 [The following information applies to the questions displayed below.] Marathon Company makes and sells a single product. The current selling price is $19 per unit. Variable expenses are $11.4 per unit, and fixed expenses total $58,620 per month. (Unless otherwise stated, consider each requirement separately.) Problem 12-25 (Algo) Part g & h Management is considering a change in the sales force compensation plan. Currently each of the firm's two salespeople is paid a salary of $2,500 per month. g. 1. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.95 per unit, assuming a sales volume of 7,450 units per month. 2. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.95 per unit, assuming a sales volume of 7,100 units per month. h. 1. Assuming that the sales volume of 7,100 units per month achieved in part g could also be achieved by increasing advertising by $1,000 per month instead of changing the sales force compensation plan. What would be the operating income or loss? 2. Which strategy would you recommend?
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